March 5, 2013

IT to See Small Budget Hike in 2013 Despite Operational Cutbacks, As New "Borderless Business Environment" Drives Increased Demand and Expectations

Imperatives For 2013 Agenda Include Demonstrating Business Impact, Driving Innovation, and Future-Proofing the Service Delivery Model

MIAMI & LONDON, March 5, 2013 - IT organizations can expect to see small increases in operating budgets for 2013, even as cutbacks continue across other parts of business services, including finance, HR, and procurement, according to new IT Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT).

The study found that the IT budget increases are in part being driven by increased demand and expectations, as IT organizations are being asked to respond to the new"borderless" business environment by building out a flexible, virtual, data-enabled model for service delivery. IT will play a key role as companies seek to fundamentally improve how they collaborate, make decisions, and execute operations.

The Hackett Group's research identified three imperatives that shape IT strategy and the IT agenda for 2013, as companies seek to reduce complexity, improve analytics, and solidify their strategic contribution to the organization. IT leaders are seeking to demonstrate their impact on the business, both as a backbone of global operations and as an enabler of new revenue-generating capabilities. They are driving business-enabling innovation, in support of the new borderless business environment. Finally, IT leaders are seeking to future-proof their service delivery model, rethinking their role as companies become more global and focusing less on building technology and more on enabling capabilities.

"IT priorities for 2013 are being driven by the dramatic shift we're seeing globally," explained The Hackett Group's Global IT Advisory Program Leader John Reeves."Externally, companies are realizing that growth will come by expanding beyond traditional borders, whether that be new geographies or new forms of business relationships with their customers. Internally, functional borders between business services operations are also coming down in the wake of cross-enterprise, end-to-end process ownership. Finally, there are dramatically fewer barriers to service delivery placement, with Global Business Services operations able to provide seamless support to internal customers.

"These changes are driving pressure on IT organizations to play a larger role, to be operationally flexible, reduce overhead, and increase customer satisfaction to counter market volatility," said Mr. Reeves."IT needs to move beyond its traditional role as a cost center and focus on business enablement. To truly optimize for the new 'borderless business environment,' it's key that IT help companies drive towards one view of their products/services, their customers, and their financials. This is something that most companies still find tremendously challenging."

The Hackett Group's research found that organizations are expected to experience a small increase in IT investments, with operating budgets rising just over 2 percent in 2013. While the planned increase in IT investment is modest, it is significant compared to other business services, which anticipate the need for both cost reductions and staff cuts. Reductions in IT staff of less than 1 percent are expected, but these are minimal compared to some other business services functions, such as finance, where a 9x larger reduction in force is expected.

Demonstrating IT's impact on the business is one critical issue IT leaders expect to address in 2013. Companies are clearly emphasizing technology's central role in enabling overall strategy, and IT has the opportunity to be a trusted partner and leader in this transformation. To do so, it needs to strengthen its relationship with sponsors and show its value in business terms to justify the investment. Three of the top priorities identified by IT leaders in The Hackett Group's study address this: building business relationship management capability; remaking perceptions about IT as a business-focused service; and measuring IT's performance in business-facing terms.

Several priorities identified in The Hackett Group's study demonstrate a focus on the issue of driving business-enabled IT innovation for 2013. At its best, IT can gain a reputation for innovation by leading the business in transforming its capabilities, experimenting with new ways of doing things under tight constraints, and identifying new analyses to perform on data to obtain competitive advantage. For 2013, IT leaders are focusing on enabling analytics and identifying new opportunities to reduce complexity and costs. To foster a culture of innovation, IT needs to provide opportunities for teams to experiment, even if these experiments sometimes fail.

Finally, The Hackett Group's study shows a strong focus on future-proofing the IT service delivery model for 2013. As companies become more global and vendors offer more services that can be consumed directly by the business, IT is rethinking its role, focusing less on building the technology and more on enabling the capability. As a result, IT's operating model needs to be radically different than it was 10 or even 5 years ago. Foundationally, IT executives have cited the need to adapt the function's Service Delivery Model to support global operations, including a substantial increase in integration activity. In addition to scale changes, though, IT needs to focus less on building technology and more on enabling capabilities. In part, this transformation involves taking a leadership role in analytics, understanding and presenting IT solutions and performance in business terms, clarifying the cost of IT services, and incorporating SaaS options in the technology evaluation process. A key element of accomplishing all this will be talent management, with IT leaders needing to ensure that they have staff with the skills that are required, and have organized staff into high-performance teams to ensure their success.


About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 52% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group's clients and partners to achieve world-class performance.